An editorial appeared in today’s New York Times documenting how institutions lending money for student loans through the Department of Education are collection all kinds of fee revenue since, as the Times notes, the institutions have effectively taken over the DOE (paging Margaret Spellings – gee, another Bushco instance of “the fox guarding the hen house”…go figure, huh?).
This information describes the difference between the two major types of student loans: direct loans in which the government is the lender, and subsidized loans as part of the Federal Family Education Loan (FFEL) program in which another entity is the lender.
And when it comes to “other entities,” the biggest is Sallie Mae, as noted in this San Francisco Chronicle story. Here is something else noted in the story…
Direct lending, which was created by Congress in 1993 and championed by the Clinton administration, provides loans directly to students through their colleges, bypassing the banks and student-loan-guarantee agencies that make up the rival guaranteed-loan program.And do I need to mention that direct loans are less costly than subsidized ones (subsidized by companies such as Sallie Mae)?
So how do companies like Sallie Mae continue to hold sway in the manner described in the Times editorial?
Enter House Repug Minority Leader John Boehner, the best friend private institutions providing subsidized loans ever had (if he wasn’t, would his daughter be working in loan collections for a Sallie Mae-owned company?).
As noted in the Chronicle story…
Over the past year, Mr. Boehner worked especially closely with Sallie Mae lobbyists in spearheading efforts to defeat a bill supported by direct-loan supporters that was designed to entice colleges to enter the program.And…
He also pushed legislation, favored by Sallie Mae and other student-loan providers, intended to make the federal student-loan-consolidation program less attractive to borrowers by preventing them from being able to lock in low rates for up to 30 years, as they can now. Instead he backed a plan put forward by the loan industry that would have shifted the interest rate on consolidated loans to one that varies from year to year.
Aides to Mr. Boehner chafe at suggestions that they are acting at the behest of Sallie Mae or any other student-loan provider. They point out that he pushed a bill through Congress last month that would cut lender subsidies as part of a larger measure that aims to reduce the federal budget deficit.As we ponder the image of Boehner standing over a derby not unlike Bullwinkle J. Moose telling Rocky The Flying Squirrel “Nothing up my sleeve – presto!” before he pulls out the growling head of the rhinoceros by accident (as I’ve said before, my consciousness is a dusty attic of pop-culture baby-boomer references), let’s recall the performance of the recently-installed 110th Congress on this issue.
"The student-loan legislation that passed through our committee in the House did not include changes lobbied for by Sallie Mae," said Don Seymour, a spokesman for Mr. Boehner. "So any attempt to correlate political contributions to policy is patently false."
But the bill (S 1932) was not as tough as an earlier version that had narrowly passed the House in November. For example, the earlier measure would have doubled the fee that private lenders must pay to the government to originate a loan, to 1 percent of the amount lent.
Loan-industry officials were in an uproar over that bill. But in a speech he delivered in December at the annual meeting of the Consumer Bankers Association, Mr. Boehner sought to reassure the lenders that they would not be unhappy with the final measure. "Know that I have all of you in my two trusted hands," he said, adding later, "I've got enough rabbits up my sleeve to be able to get where we need to" (The Chronicle, December 16).
This takes you to information on H.R. 5 (Roll Call 32), the College Student Relief Act, which passed out of the U.S, House in January (as part of the initial two-week wave in which six major pieces of legislation were passed, this being one). Upon arrival in the Senate, it was rolled into S. Con Res 1 which, as of May 3rd, is still being resolved in a House-Senate conference (as noted here: part of the holdup was due to an amendment by Arizona’s Jon Kyl which tried to lower the rate of the “death tax” – God, they’ll never stop trying to pull this nonsense).
Update: Curiouser and curiouser...
Update 2/27/14: HAHAHAHAHA!!!! (here - h/t Atrios).